Analysis Of The Development Trend Of Textile And Garment Industry In 2018

1, the operation of the industry: weak demand recovery, supply side capacity expansion continued to slow down, raw materials and cotton prices stabilized at a high level

1) demand side: the low base in 2016 and the rebound in external demand in 2017 have helped to boost the total export volume of textiles, clothing and footwear for 1-10 months.

Customs data show that in 2017 1-10, the total export volume of textiles and clothing in China was 221 billion 470 million US dollars, down 0.4% compared with the same period last year, and the growth rate was 5pct higher than that of the same period last year.

The total textile exports amounted to US $90 billion 340 million, an increase of 2.6% over the same period last year, and the growth rate increased by 5.9pct compared with -3.3% in the same period last year. The total export volume of clothing and accessories reached 1311.3 billion US dollars, down 2.3% compared with the same period last year, and the growth rate increased by 4.4pct over the same period last year. -6.7%

In addition, the total export value of footwear was 40 billion 70 million US dollars, up 4.5% from the same period last year, increasing by -13.9% compared with the same period last year. 28.4pct

According to historical data, the growth of export volume of textile and clothing in China has been slowing down since 2012, the first decline in 2015 and the further decline in 2016. The 2017 decline was narrowed by external demand and low base.

According to the monthly situation,

January

Exports amounted to US $23 billion 900 million, a slight decrease of 0.9% over the same period last year.

A sharp decline in February, down 29.9% over the same period last year.

In 3 and April, the impact of low base was improved, up by 18.8% and 3.6% respectively.

In May, the export volume of textiles and clothing was 23 billion 400 million US dollars, down 0.5% compared with the same period last year.

In June, China's textile and clothing exports amounted to US $24 billion 400 million, an increase of 1.5% over the same period last year.

Textile and garment exports in July amounted to US $25 billion 500 million, up 1.4% over the same period last year.

In August, the export volume of textiles and clothing was 26 billion 300 million US dollars, down 5.9% from the same period last year.

In September, the export of textiles and garments was about US $23 billion 700 million, an increase of 4.3% over the same period last year.

In October, the export of textiles and garments was about US $21 billion 700 million, an increase of 1% over the same period last year.

Therefore, from the monthly export amount and the total export amount, the trend of textile, clothing and footwear export warming has been initially established, but the degree of recovery and sustainability need to be observed.

2) supply side: the pace of expansion of the industry is slowing down, the number of single digit output has increased, and the inventory clearing is coming to an end.

The investment in fixed assets of textile industry still showed a low digit growth year on year.

Overall, at the end of the 2012-2017 year end, the fixed asset investment in textile, clothing and leather manufacturing industry showed a high rate of decline.

According to the industry, the fixed asset investment growth rate of textile industry started to rebound from the beginning of 2016, and maintained a weak recovery trend. In 2017, the cumulative growth rate was 6.6% in the 1-9 months of 2017. The fixed asset investment in garment industry rebounded in June 2016 from the first half of June 2016, and the cumulative growth rate was 3.5% in the 1-9 months. The investment in fixed assets of leather and footwear industry also fell after the bottom rebound, and the cumulative growth rate was 1-9 in June.

Since 2012, the inventory of finished goods in textiles, clothing, shoes and leather products has shifted down year-on-year, and the inventory clearance has come to an end. In 2017, 9, 2017, the finished goods inventory of textiles, clothing, shoes and leather products increased by 5.6%, 4.2% and 1.9% respectively.

The monthly growth of yarn and cloth has been basically maintained at the range of 0%-5% in 2015 years, and the expansion of industry output and supply is more prudent.

In September 2017, the output of yarn and cloth increased by 2.1% and 2.9% respectively.

3) cost side: domestic cotton short-term prices remain stable; external cotton prices are narrow.

With the increase of labor costs caused by the gradual disappearance of domestic demographic dividend and the increase of environmental costs caused by stringent environmental policies, the low cost competitive advantage of textile and garment processing and manufacturing industries with labor intensive will gradually lose and will become a norm.

Therefore, the main factors affecting the profitability elasticity of textile manufacturing enterprises in the future are the changes in raw material prices and the enhancement of R & D and fine management level, and the most sensitive thing to implement at this stage is the fluctuation of cotton prices.

Judging the trend of domestic cotton prices: maintaining stability in the short term

This year, the national cotton reserves were closed in September 29th, with a total turnover of 3 million 222 thousand and 600 tons, with an average turnover rate of 73.63%, with an average price of 14731 yuan / ton. At present, the national cotton stocks are about 500 million tons.

After the completion of the dumping and storage of the national cotton reserves, the new cotton is listed on the market, maintaining the relative balance between domestic supply and demand, and maintaining relatively stable cotton prices. Therefore, the cotton prices are expected to be relatively stable in the short term.

As of November 13, 2017, the price of 328 cotton in China was 16001 yuan / ton.

Judging the trend of external cotton prices: supply and demand are basically balanced and prices are narrow.

According to the data released by ICAC (International Cotton Advisory Board), cotton production has basically maintained between 23 million and 26 million tons in the past ten years, of which the annual output of -2014 -2014 is higher in 2015, and has decreased in 2015.

Cotton consumption is relatively stable.

Overall, the global cotton production and sales volume has basically been balanced in the past ten years.

The global cotton stocks reached the peak of 22 million 310 thousand tons in the 2014 year of the year, showing a declining trend since 2015. The stock consumption ratio also dropped from the high level of 92% in 2014 to 75% in 2016, but it is still relatively high compared with the historical level.

Under the background of tightening monetary policy, combined with the global production and marketing balance and high inventory level, it is unlikely that the cotton prices will rise substantially as long as there is no such a small probability event that the cotton production will be greatly reduced due to extreme weather.

4) the RMB exchange rate will show a narrow fluctuation in 2018.

Since the RMB depreciated sharply against the US dollar in August 2015, the RMB exchange rate has entered a period of sustained depreciation until the beginning of 17.

Then entered the appreciation stage, 17 yuan early year to date, the renminbi appreciated 4.46% against the US dollar.

We expect that the US dollar will show a narrow fluctuation in the RMB exchange rate next year, and the expected impact on the export volume and profit level of the enterprises will be weaker.

5) preferential tax policies have attracted global textile manufacturing capacity to pfer to Southeast Asia and form industrial clusters.

The pfer of manufacturing process to Southeast Asia has become the trend of textile manufacturing industry: first, the import of cotton from Vietnam has no quota restrictions, compared with the cost of cotton made in the United States and cotton in China, but the quality will be better and the defective products will be less.

Second, Southeast Asian countries offer preferential tax policies to attract foreign investment, such as export enterprises' VAT rebates, income tax relief and low import tariff costs.

Third, international trade barriers in Southeast Asia are lower than those in China.

Fourth, wages in Southeast Asia are only 1/3 of the southeastern coastal areas of China. Although the labour efficiency of local workers is only 1/2 of that of domestic workers, the cost of labor has declined to some extent.

However, due to incomplete matching of textile industry in Southeast Asia, such as lack of printing and dyeing links and unstable electricity supply, the degree of labor proficiency of local workers is also not as good as that of eastern coastal areas of China. Therefore, the pfer of industries takes a certain time.

2, the new trend: quality suppliers are expected to enjoy the upgrade bonus.

Under the logic of consumption upgrading, the quality of production capacity is increasingly scarce.

In order to adapt to the trend of consumption upgrading and fierce competition in the market environment, downstream brands must also continue to carry out technological innovation and enrichment.

Category, speed up the new frequency.

The delivery time, quick response ability and quality requirements of orders are gradually improving.

Therefore, domestic high-quality production capacity resources are increasingly scarce, the leading manufacturers in the industry have improved their bargaining power, improved customer level and order structure, and improved profit margins, and the valuation center is expected to move upward.

1) under the logic of consumption upgrading, the downstream brands pay more attention to the core suppliers' resources.

From the point of view of professional division of labor, brand merchants mostly engage in design and marketing.

The procurement and production links are to be borne by the supplier.

Under the current logic of consumption upgrading, whether the high-end luxury goods that pursue brand value or the general public brand pursuing high quality price ratio, the importance of quality and delivery has been raised to an unprecedented level.

From the point of view of supply side capacity, due to rising labor costs and stringent environmental policies, small and medium-sized enterprises have closed down, and industry concentration has further concentrated on leading enterprises.

2) core suppliers' valuation enhancement logic

First of all, the tight schedule of quality suppliers is normal. And because skilled workers need to accumulate a certain amount of time, the release of new capacity is usually slow.

For example, China's seamless underwear manufacturing leader Qiao Ting Tingting's current underwear production capacity is 16 million. In the next three years, Guizhou's capacity can reach 6 million of the total production capacity. It can only increase the capacity of 10%-15% every year, and it can not meet the needs of all customers' orders.

Second, under the condition of tight production capacity, priority should be given to orders for high-quality brand customers with high customer concentration.

For example, the top three customers of Decathlon, UNIQLO and Wacoal are more than 80%.

The income accounts for 79% of the total income.

Generally speaking, the higher the brand customer level is, the larger the profit margin will be given to the supplier. Therefore, under the condition of limited capacity, the high quality supplier can improve the profit level by optimizing the customer structure.

Third, in order to enhance the competitiveness of the market, the high quality brand dealers also constantly improve the quality and technical content of the products, forcing suppliers to continuously develop and upgrade. In this process, the brand operators and suppliers achieve a win-win situation.

Fourth, profitability has been improved in these links, and has formed a virtuous circle.

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